Article excerpt

Only four for-profit companies ranked among the top 10 fitness
centers in the 1998 Journal Record Book of Lists. Four others were
hospital-supported institutions, and then there are the Y's -- the
industry-leading YMCA, which has eight metro locations and is
looking
to open its ninth, and the YWCA with two. With the list's January
update, the YMCA hung on to the number one spot with 14,225 members.
Its closest follower was The Weight Room, a for-profit firm with
6,500 members.

Despite that huge gap, the race remains heated. In this young
sector, with only two of the 19 largest competitors over the age of
20, some combatants feel tax advantages tilt the slate in the
nonprofits' favor. Others point to a growing contest between the
nonprofits. For with the national emphasis on health care reform
focusing on wellness and preventative care, physical fitness plays a
primary role -- which some think may tilt the slate towards hospital-
based systems. Growth figures might support that, with three of the
four hospital centers in the Top 10 being less than three years old.
The fourth, Integris Health's Pacer Fitness Center, is the industry
pioneer.
Recent developments indicate how the sands shift in health care
economics.
* Nonprofit Integris, Oklahoma's largest health care provider,
bought out 23 investors to gain a 51 percent share in The Adams
Course last year. That for-profit fitness center, which specializes
in training for high school athletes, relocated from a 10,000-
square-
foot facility to a new 51,000-square-foot center in January. The
facility is technically located in Oklahoma City, but sits right on
the edge of Edmond -- nowhere near any of Integris' facilities.
* SSM Health Care of Oklahoma, which operates St. Anthony
Hospital, went the other direction. Through a partnership with
Players Inc., SSM folded the members of its St. Anthony North
SportSciences fitness center into Players' The Santa Fe Club,
North's
across-the-street competitor. With a minority share in its former
rival, St. Anthony then closed down its own center.
To accommodate this change, the club has added about 3,000 square
feet of new fitness equipment in its 57,000-square-foot facility.
The renovated club, renamed Saints Santa Fe, will unveil its new
offerings Feb. 28. According to Jeff Moody, the club's membership
director, its membership has expanded from about 600 to 1,000 as a
result of the merger.
Pam Troop, executive director of Saint Anthony North, said the
partnership is harmonious partly because the two share a "wellness
philosophy." Likewise, Colin Robertson, one of the owners of Players
Inc., said the club benefits by being able to draw on the expertise
of St. Anthony's medical staff -- including doctors,
physiotherapists
and dieticians.
In both cases, the hospitals sacrificed the option of a nonprofit
tax exemption in order to join with commercial establishments.
The tax factor
While Oklahoma's nonprofit fitness centers do pay sales taxes and
property taxes, their foundation is built upon the corporate income
tax exemption. About 72 percent of medical fitness centers claim
nonprofit status. Those who do not may be choosing to avoid a
growing controversy and possible legal hassle.
Jay Ablondie, assistant director of government relations at the
International Health Racket Sports Club Association, says the tax
exemption enjoyed by most hospital fitness centers and Y's is unfair
to other small businesses.
"They have strayed from their charitable mission to those who
can't afford private centers," he claims. But he concedes "it can be
a tough issue for businesses to relate to the public,"because of
what
he called the "halo effect" surrounding nonprofit organizations.
Nonetheless, in December the IHRSA scored a major victory in
Pennsylvania with the passage of legislation which says, "no
charitable institution shall use their tax-exempt status to compete
unfairly with small business. …